European Union Governance towards the Eastern Neigbourhood: Transcending or Redrawing Europe's East-West Divide?

How does the European Union (EU) shape the integration of non‐member states in transnational markets and why are other external actors more effective than the EU in fostering regulatory change in such a context? Examining the case of Ukraine, the article finds that international financial institutions and donors are better at eliciting reform than the EU because they empower state and non‐state domestic actors, who in turn demand and enforce new rules in their home markets. Overall, because the EU limits itself to intergovernmental co‐operation and other external actors only engage in reform of select sectors, we do not observe comprehensive regulatory change in the eastern neighbourhood. Shallow transnational market integration is the result. Eastern neighbours are therefore economically worse off than even the laggards of EU enlargement, Bulgaria and Romania. Consequently, a new developmental divide at the EU's eastern borders between countries in‐ and outside the EU is emerging.